28 Jan 2009, David Benyon, Operational Risk & Regulation
MADRID - Spanish bank Santander has offered €1.38 billion in compensation to individual clients exposed to Bernard Madoff's $50 billion hedge fund-cum-ponzi scheme unearthed in December 2008.
The €1.38 billion (£1.28 billion) will be used to pay individual investors but not institutions caught by the Madoff pyramid scheme. Santander will issue the €1.38 billion in preferential shares with an annual 2% coupon to compensate its clients, costing €500 million.
Santander-operated hedge fund Optimal Strategic US Equity used Madoff's scheme to handle client investments, losing €2.3 billion to the fraudster. Paul Marshall, the co-founder of the Marshall Wace hedge fund, told a UK Treasury Committee yesterday that it is "very unlikely" a Madoff-type scheme could operate in the UK, but that hedge fund disclosures should be generally improved.